Cloud Spending Increases Among New Zealand Organizations Driven by SaaS Applications: Study

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Among New Zealand organizations currently using cloud solutions, 63 percent plan to increase their cloud-based solutions budget over the next year, compared to 57 percent last year, according to a new study.

The State of Cloud Computing New Zealand 2013 study from Frost & Sullivan explores how New Zealand organizations use cloud services and their expectations for the future.

According to the study, almost half (47 percent) of cloud-using organizations in New Zealand already spend more than 10 percent of their total IT budget on cloud. About a third (32 percent) spend more than 20 percent.

Email and storage & office productivity solutions are most accessed via the cloud. Of the New Zealand organizations polled, 88 percent host email via the cloud (33 percent is public cloud, 38 percent private and 17 percent hybrid). Private clouds most often are used for server computing solutions, email security, office productivity solutions and storage. Hybrid cloud environments most often deploy CRM.

SaaS: the main NZ cloud revenue driver

According to Frost & Sullivan, Software-as-a-Service still accounts for the largest portion of cloud revenues, although the adoption of Infrastructure-as-a-Service and Platform-as-a-Service has been very strong over the past two to three years. The larger an organisation is, the more likely it is to use SaaS, especially office productivity applications, CRM, HRM and ERP.

Study authors predict that at least a quarter of organizations not currently using office productivity applications are likely to do so over the next 12 months. Meanwhile, CRM, desktop and analytics and Business Intelligence are the SaaS applications most likely to be migrated. HRM, email security and ERP are less likely to be migrated to the cloud.

Multinational SaaS vendors such as, SAP, Microsoft, and Google have had good adoption in the New Zealand market, but competitive New Zealand-founded SaaS providers continue to emerge led by SaaS accounting application Xero.

Reasons to take a pause

Some of the reasons New Zealand organizations are hesitant towards cloud solutions are data security and the difficulty of integrating existing systems and legacy applications.

Private cloud deployments, despite its future scaling limitations, are more widespread than both public and hybrid cloud deployments for all types of software and applications except conferencing. The top three concerns when building a private cloud are network security, application security and access control and IT service management tools.

When selecting a cloud vendor, security is the most important criteria, followed by reputation, trust, service and reliable support, price and expected return on investment. Organizations also expect sufficient SLAs, product scalability and a range of value-added services.

The ripe time for cloud adoption in New Zealand

Frost & Sullivan New Zealand country manager Andre Clarke lists the factors driving adoption of cloud computing as follows: “Overall IT cost reduction, reduced risk of IT disruption from external factors such as natural disasters, greater overall business agility and flexibility, enhanced IT infrastructure efficiency and faster deployment time.”

In neighboring Australia, Frost & Sullivan has reported very strong growth in Australian cloud computing in 2013. It predicts that Australia will continue to have high demand throughout 2014 partly due to Australia’s weak market outlook that will force organizations to rethink their IT strategies in an effort to reduce their overall IT spending. Given New Zealand’s business and cultural ties to Australia, similar conclusions around cloud adoption could be drawn for New Zealand.

In New Zealand, 59 percent of organizations already outsource their data center hosting and 78 percent expect their data center requirements to increase over the next 12 to 18 months, largely driven by cloud computing in one way or another. This is driving demand for more local data center capacity through the building of new facilities.

Frost & Sullivan Australia & New Zealand ICT Practice Senior Research Manager Phil Harpur sees an overall shift to the cloud among New Zealand organizations of all sizes and for a plethora of applications. “Though larger organisations generally spend more on cloud computing services, smaller and medium sized enterprises investing significant amounts of their IT budget have also increased,” he said in a statement. “All these reflect a market very much in a growth phase.”

About the Author

David Hamilton is a Toronto-based technology journalist who has written for the National Post and other news outlets. He has covered the hosting industry internationally for the Web Host Industry Review with particular attention to innovative hosting solutions and the issues facing the industry. David is a graduate of Queen’s University and the Humber College School of Media Studies.

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